Friday, October 31, 2008

In which I admit defeat...

I've spent almost every free moment I've had this week with a yellow tablet and a pencil in one hand and my iPhone in the other hand running the Spend application and I still can't reconcile our budget.

My system isn't working.

This is how I've BEEN doing the budgeting (aka: the way that doesn't work). I spend money and keep the receipts in my wallet until I get the chance to enter them into Spend. Then, unless I might need the receipt for a return or for tax purposes, I pitch it. When I get behind, like I did last week and the receipts pile up, I just get out a yellow tablet, categorize everything and then enter it all into Spend as a single chunk in each category.

When you enter data into Spend, you don't have the option to split single purchases into multiple categories, you have to do that manually, which means when I spent $100 at Fred Meyer, it will inevitably be divided up into groceries, household, clothes, etc and I end up with no record of the TOTAL amount of that purchase, unless I either keep the receipt (which I haven't been doing) or painstakingly go back through all my categories and add up the Fred Meyer entries that are on the same date. This process? NOT SO FUN!

And then... the VISA bill arrives.

I've spent countless hours this week trying to figure out which expenses I've already entered and which ones Dave forgot to give me receipts for and I'm at a loss. I too overwhelmed to even begin to finish it.

I give up! I admit defeat! Our Visa bill was around $2300 this cycle and even though that represents a non-month (why can't the bills just run from the 1st through the end of the month?!?!?), it indicates we weren't HORRIFICALLY off base. Of course, that doesn't include the debit card spending, so who knows.

What I do know is that doing the same thing over and over again, like I've done for the past MANY YEARS and expecting different results is the definition of insanity, so I've already found a NEW MUCH BETTER SYSTEM, thanks to you wonderful readers.

I've signed up for mint.com and so far I love it. LOVE IT. Unlike Spend, it has the ability to track my spending online for me AND it automatically downloads all my purchases from ALL my accounts, which means I don't have to maintain separate account totals (debit spending, like at Winco/Costco vs. VISA account spending) AND the best part is that it allows me to subcategorize (ie: SPLIT) purchases, which is why I've generally avoided such programs in the past. Anyone can track OVERALL spending by just balancing their checkbook, but I almost always spend in multiple categories WITHIN THE SAME PURCHASE, so simply keeping an accurate ledger balance never tells me where my money actually goes. (Target isn't a CATEGORY, is it?)

Mint.com seems to be the solution to this problem and best of all: It's FREE.

I've got everything set up so we'll be a go to start the new system beginning tomorrow, the first of the month. Obviously, I'll let you know how it goes.

Mint.com is free because they advertise credit cards and bank accounts to you when you're logged in, in a separate section. These are their suggestions for you to save more or pay a lower interest rate, based on your current accounts. I'm sure those companies are paying to be recommended by Mint. That's their business model.

You can't make ANY changes to your accounts through Mint--that's how it's secure. It's just a read-only representation of all your money. Even investments like 401K and college funds. I've had it since early this summer and I think it's fantastic for all the reasons mentioned.

Don't be scared... you can read up on the site about how secure it is.

I use Quicken at home like it's an actual check register. I input everything that comes out of our checking account, but I do categorize everything so I know how well I did on my budget. Quicken will let you use multiple categories per expenditure.

I use Spend as a measure for my budget -- one that I can carry with me all the time. When I spend any money, I immediately put it into Spend, but I do have to manually divide up the categories. Spend is just for my own measure of how I'm doing. I don't put exact amounts in -- I round up. For instance, if I spend $43.72 at the dry cleaners, I input $44 into Spend under the category Personal Care. I am using it just to keep myself on track. Sort of like an envelope system without carrying actual cash.

I tried using Quicken about a year ago, but for some reason, it was not able to properly download the transactions from both of my checking accounts. (I keep two: one for bills, one for discretionary spending). I spent many hours with their tech support and the problem was never resolved. It was only capable of downloading transactions from a single checking account at each bank. So basically, it was useless to me and I got my money back. Which was sad because I was a bookkeeper for many years and I've always loved Quicken/Quickbooks.

I've been using mint.com since February. I'm really glad that it's out of Beta because there were some major snafus- like I lost several months of spending for no reason. I hope going forward that doesn't happen again because it major screwed with my budgeting.

You know what's funny, Kristy? Many of the professional financial planners I've worked with DID have their own personal bookkeepers. It's something I'll definitely consider when I'm back to earning a salary again. It's like hiring a housekeeper; you outsource the small stuff.

I've also known many very successful financial planners who never even TRIED to budget. They just spent what they spent and never thought twice about it. As long as you PAY YOURSELF FIRST (meaning save and invest and HAVE A PLAN), budgeting is ENTIRELY secondary and not even all that important. As long as you're hitting the big numbers (insurance premiums, college savings, retirement funding, emergency funds, etc), it honestly and truly doesn't matter what you spend on groceries.

This blog is not about how perfect I am. In fact, it's completely the opposite. It's about how much of a giant raging pain in the ass it is to stick to a budget, no matter what your resources are. I'm trying to stick to a budget simply because I think we could do better, we WOULD do better if I could keep track of our spending better. I'd like to be looking forward about it instead of looking back. I write this blog because I think others can benefit from both my knowledge AND my struggle.

I am excited to hear about mint.com. It looks cool. I think that I may try it without waiting to see how you like it. I just wanted to say that I enjoy your blogs. I have 5 and 4 yo boys and I know how you feel when someone takes a black crayon to a white rug. Arghhhhh!. I appreciate all that you share on your blogs and followed you from club mom to mandajuice to the naked ledger again. Kudos to you!

No one's perfect. I suppose I just saw the irony of the situation. I'm pretty to the point with my commentary because I work fulltime and am in college full time etc. I'm sure sometimes my briefness comes across as cold. My apologies. I come here because it's highly interesting to see how other people handle finances.

If "budgeting is ENTIRELY secondary and not even all that important", then why do it?

I'm a non-budgeter, so this is an honest question. As I was reading this, I was baffled as to why it matters so much to categorize your spending. As long as you're staying within the $2000 total every month, does it matter what amount goes into each category? It seems like all the details of the budget are just stressing you out. What is the benefit to knowing EXACTLY where every penny goes?

Betsy - from an accountant's point of view (that would be me) budgeting is important because if your situation changes you know the details of what you are spending things on so you know where you can make adjustments.

However, being an accountant in my profession, I don't budget at home. I keep a lot of it in my head and this drives my husband crazy! But I am one of those loons who knows their mortgage balance too.

You need to do what works for you. I think it's cool that Amanda has this blog. We can share and comisserate!

betsy, that's a great question! I agree, if Dave and I routinely stayed under the $2,000 limit, it wouldn't matter. The problem is that we ROUTINELY go over, so by categorizing things more specifically, I'll know EXACTLY where I'm overspending. For the longest time I thought I was spending $1000 or more on groceries, but by categorizing things, I'm starting to notice that the big category for my overspending is household, which used to just get lumped into my grocery spending.

Do you have stock investments? (401(k), mutual funds, individual stocks)

Do you keep a budget every month?

About Me

I am a stay-at-home mother of two (a five year old boy and a two-year old girl). Before ditching the proverbial pantyhose to wipe butts for a living, I was a professional financial planner for 7 years. I've spent thousands of hours poring over my clients' budgets, but have never consistently made time for my own. I came up with this blog as a way of illustrating one woman's spending. I wrote The Naked Leger for Club Mom for almost two years and in hindsight it definitely helped us stay better on track with our spending. A little accountability goes a long way!
As a culture, we shy away from discussing money in spite of the fact that we can all learn from each other. So I'm putting it all out there (again!).